Jumbo S.A. (ATH:BELA) is set to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled on or before the record date. This means you will need to buy Jumbo’s shares by June 2 to receive the dividend, which will be paid on June 8.
The company’s next dividend payment will be €0.39 per share. Last year, in total, the company distributed €1.16 to shareholders. Last year’s total dividend payout shows that Jumbo has a 7.4% yield on the current share price of €15.56. If you’re buying this company for its dividend, you should have some idea of the reliability and sustainability of Jumbo’s dividend. We therefore need to check whether dividend payments are covered and whether profits are increasing.
Check out our latest review for Jumbo
Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Jumbo has a low and conservative payout ratio of just 24% of its after-tax income. Still, cash flow is usually more important than earnings in assessing the sustainability of dividends, so we always need to check whether the company has generated enough cash to pay its dividend. Fortunately, its dividend payouts only accounted for 36% of the free cash flow it generated, which is a comfortable payout ratio.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Luckily for readers, Jumbo’s earnings per share have grown 11% annually for the past five years. Earnings per share are growing rapidly and the company keeps more than half of its profits with the company; an attractive combination that could suggest the company is focusing on reinvestment to further boost earnings. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Jumbo has achieved an average annual increase of 26% per year in its dividend, based on the last eight years of dividend payments. It’s exciting to see that earnings and dividends per share have grown rapidly over the past few years.
Is Jumbo an attractive dividend-paying stock, or is it best left on the shelf? It’s great that Jumbo is growing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. It’s disappointing to see the dividend cut at least once in the past, but as things stand the low payout ratio suggests a conservative approach to dividends, which we like. There’s a lot to like about Jumbo, and we’d prioritize taking a closer look.
With this in mind, an essential part of thorough stock research is to be aware of all the risks stocks currently face. For example, we found 2 warning signs for Jumbo (1 does not suit us too much!) that deserve your attention before investing in shares.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.